Impact Investing
Candlefocus EditorAn impact investor evaluates potential investments through the lens of impact over and above the likelihood of financial returns, so the process of selecting investments is often based on a company's commitment to corporate social responsibility and its dedication to making a positive impact in their community or the world. Impact investing portfolios can include investments in renewable energy, sustainable agriculture, clean technology, low-income housing and other initiatives intended to generate long-term positive social and environmental changes.
Impact investors use a variety of approaches to measure the impact of their investments. Impact investment data may include metrics such as the number of jobs created or the prevalence of pollution in an area. Impact investments can also be measured through their financial performance, such as the return on investment (ROI) generated by the investment relative to its risk profile. Studies have shown that impact investors can achieve market-rate returns, and the Global Impact Investing Network reported that more than 88% of members meet or exceed their desired outcomes.
Impact investing is a rapidly growing trend that has the potential to provide both financial returns and social value. As the demand for socially responsible investing continues to rise, more investors are turning to impact investing as a potential way to benefit both their finances and their communities. Impact investing can be used as a tool to fund both for-profit and nonprofit businesses and provide them with the capital necessary to build a better world.